icra: Telecom revenues set to rise 12–14% this fiscal on tariff hikes
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Revenues in the telecom industry are expected to grow steadily in the current fiscal, with analysts expecting a 12-14% growth in operating income at Rs 3.5-3.7 lakh crore on the back of tariff hikes implemented in July 2024.According to a report by ICRA , the tariff hikes translated to a healthy growth in average revenue per user (ARPU), a key performance metric, which though remains the lowest globally. ARPU levels are projected to have increased to Rs 200 in FY2025, from Rs 184 the previous fiscal. Another tariff hike, expected by the end of FY2026, is expected to rally ARPU levels to Rs 220.The ratings firm noted that steady increase in 4G/5G subscribers and traction in data usage led to a rise in industry AGR (adjusted gross revenue) over the last few quarters. Industry AGR improved to around Rs 65,673 crore in the December quarter, translating to 11% growth on-year. However, growth in AGR is primarily being driven by the tariff hikes implemented in 2024.Data subscribers have been growing at a healthy pace on account of the proliferation of cheaper smartphones and availability of content, ICRA said, adding that the penetration of broadband subscribers reached 79% as of December 2024. Cheaper smartphones, coupled with low data tariffs, are driving the demand for data. Further, content availability and increased broadband speed have also helped increase the monthly data usage per subscriber to around 21.52 GB per month, ICRA said.It expects industry profitability to grow by 12-14% in FY2025 to cross Rs 1.6 lakh crore, followed by a 10-12% expansion in FY2026. The brokerage said the industry has upfronted a significant capex for 5G rollouts in FY2024 and FY2025, adding that capex intensity is likely to have peaked, and is expected to subsequently moderate going forward. The industry capex is likely to be around Rs 3 lakh crore over the next 3-4 years.However, the absence of retail-based use cases for 5G, and expensive customer equipment and low fiberisation levels (estimated to be around 38% of total towers) pose a threat to 5G expansion, ICRA said. This has also constrained ARPU growth to some extent.The total industry debt is estimated to increase to around Rs 6.6 lakh crore as on March 31, 2025, and is expected to see a steady moderation going forward. This increase is partly attributable to the addition of deferred debt obligations, which stem from AGR liabilities and spectrum auctions of FY2022 and FY2023, and recently in FY2025.The industry's debt to operating income ratio is likely to remain at 3.9-4 times with interest coverage at 3.3 times for FY2025. This is expected to improve in the current fiscal.
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